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Monetary policy transmission mechanism in Rwanda: review of the bank lending channel post 1994

This research attempts to empirically examine the bank-lending channel in monetary policy transmission in Rwanda, using quarterly data for the period 1996Q1 to 2011Q4. The responses of the loans supply, real output, prices, and deposits to monetary policy innovations were investigated in this research, using impulse response functions and variance decompositions obtained from a Vector Autoregressive model (VAR). Estimation results revealed that the bank lending channel in Rwanda is less effective. The findings suggest that although monetary policies working through interest rates have a significant effect on bank loans, loans appear to not influence the real output level. As in other developing economies, the financial sector in Rwanda is still weak. As a result of the absence of long- term investment, bank customers bear the risk associated with the poor quality of loans in addition to the risk associated with high and variable inflation. These are likely to hamper the monetary policy transmission mechanism.

Identiferoai:union.ndltd.org:netd.ac.za/oai:union.ndltd.org:nmmu/vital:20492
Date January 2014
CreatorsNyiranshuti, Claudette
PublisherNelson Mandela Metropolitan University, Faculty of Business and Economic Sciences
Source SetsSouth African National ETD Portal
LanguageEnglish
Detected LanguageEnglish
TypeThesis, Masters, MCom
Formatxii, 172 leaves, pdf
RightsNelson Mandela Metropolitan University

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